Scoring Methodology of Term Life Insurance

Scoring Methodology of Term Life Insurance

Term life insurance, also known as pure life insurance, guarantees a lump sum death benefit payable to the beneficiary if the insured passes away within the term. At the end of the term, if the insured is still alive, the policy may be renewed or terminated. Term life insurance mainly provides protection against the loss of financial support from the insured due to death. 10Life scores the term life products based on the coverage value, including the price and the terms.

Assumptions

The premium rate per sum assured may be dependent on factors including:

  1. Gender
  2. Issue Age
  3. Smoking status
  4. Renewal period
  5. Underwriting segment
  6. Size of sum assured

To compare the products with the same standard, 10Life applies the following assumption groupings in the comparisons:
  1. Male or Female
  2. Issue Age of 25, 35 or 45
  3. Non-smoker
  4. Yearly, 5-year, 10-year or 20-year renewable
  5. Standard underwriting or online underwriting
  6. 10-year or 20-year Target Coverage with HK$1,000,000 sum assured

Death Benefit Score

As term life insurance is a pure protection product, death benefit is the key component. There are 2 types of Death Benefit Score, which are based on the 10-year and 20-year benefit multiplier respectively. 

10-year Benefit Multiplier = 
Sum Assured(1)
10-year Average Premium(2)


20-year Benefit Multiplier = 
Sum Assured(1)
20-year Average Premium(2)

Note  
  1. Sum assured is the guaranteed death benefit payable in the event of death during the coverage term.
  2. Assuming payment frequency is annual, and the policy is renewed at current premium rates. If annual payment is not available, monthly premium multiplied by 12 is used instead.

In each gender and age group, the product with the highest multiplier is given a score of 10. The scores of the products are benchmarked against the highest multiplier.

Terms Score

The Terms Score is calculated based on (i) terms and (ii) the exclusions on specific causes of deaths, where points are deducted for the following unfavorable terms and exclusions relative to the market:

  • Policy termination upon overseas residency
  • HIV and AIDS
  • Illegal activities
  • Drug or alcohol overdose or influence
  • Armed forces participation
  • Nuclear, biological and chemical activities
  • War and terrorism
  • Suicide (after 2 years of policy effective date)
  • Suicide (after 1 year of policy effective date)

Overall Score

The Overall Score is weighted between the Death Benefit Score and the Terms Score as follows: 
 
10-year Term Life Rating
Weight
10-year Death Benefit Score
80%
Terms Score20%
Overall Death Benefit Score100%
20-year Term Life Rating
Weight
20-year Death Benefit Score
80%
Terms Score
20%
Overall Death Benefit Score
100% 

10Life scores are for reference only, and do not constitute any insurance purchase advice. You should seek independent advice before purchasing any insurance products. If you have any questions or suggestions about 10Life's scoring methodology, please email us at enquiries@10Life.com.

Updated on March 11, 2022
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